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Is (Or Why Is) SaaS The Survival Strategy In This Down Economy?

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Despite the current gloomy economic climate, with IT budgets tightening and layoffs increasing, spending on software-as-a-service continues to grow in enterprise markets. Research from firms such as …

Despite the current gloomy economic climate, with IT budgets tightening and layoffs increasing, spending on software-as-a-service continues to grow in enterprise markets. Research from firms such as Gartner, IDC, and Softletter confirm this growth and predict that SaaS market expansion will continue despite the recesson. Why is SaaS continuing to grow while many traditional licensed and on-premise software companies suffer from declining profits and static market share?

This webinar hosted and moderated by Aspire Systems featured noted SaaS industry speakers Merrill R. (Rick) Chapman of Softletter and Richard Dym of OpSource discussing:

- Softletter research analyzing increased SaaS adoption

- Reasons/Factors influencing the SaaS wave

- SaaS prospects/opportunities

- The future of SaaS and SaaS companies

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  • 1. Is (or Why is) SaaS the Survival Strategy in this Down Economy? For Webinar Audio, Dial in: Panelists: Merrill R. (Rick) Chapman Conference Line Managing Editor, Softletter US: (866) 581 2411 (Toll free) UK: 80 00 51 8866 (Toll free) Richard Dym Chief Marketing Officer, OpSource Conference ID: 98043879 Webinar ID: 983-396-776 Moderator: Date : Thursday, May 14th, 2009 Janaki Jayachandran Business Manager – SaaS Specialization, Aspire Systems 11:00 AM ET/ 08:00 AM PT
  • 2. Agenda Introduction Key Highlights from Softletter 2009 SaaS Report Upcoming Trends in SaaS Questions to the Panelists
  • 3. About Aspire Thought leader in Outsourced Product Development 1050+ product releases to date 80+ customers; 475 producteers 63% CAGR over the last six years Offices in Chennai (India), San Jose, CA, and Branchburg, NJ ISO 9001:2000 certified Awards Ranked 7th in Business Ranked in the top 500 fast growing technology companies Today Survey featuring in Asia Pacific for 3 years in a row the Best Companies to work for in India in 2005
  • 4. Panelist Merrill R. (Rick) Chapman Managing Editor and Publisher, Softletter • Author of The Product Marketing Handbook for Software, In Search of Stupidity: Over 20 Years of High-Tech Marketing Disasters and the SIIA's US Software Distribution Guide. • Rick has worked and consulted for such industry pioneers as MicroPro (WordStar) and Ashton-Tate. • Consulted for a wide variety of software and high technology firms such as IBM, Novell, Microsoft, Sun and many others.
  • 5. Key Highlights from the Softletter 2009 SaaS Reports Rick Chapman Softletter, Managing Editor and Publisher www.softletter.com www.saasuniversity.com rickchapman@softletter.com 860.657.2838 (EST/EDT, Killingworth, CT)
  • 6. Brief Intro: Softletter Softletter is now in its 25th year of publication
  • 7. Brief Intro: Softletter Published twice a month Complete coverage of every aspect of running Softletter is a software business now in its 25th year of publication Compensation, operating ratios, unique research, timely articles
  • 8. Books by Rick Chapman
  • 9. Softletter Research Publications 2009 Software as a Service Marketing Report 2009 Software as a Service Report Up-to-date information and hard data about software publishers adapting to SaaS, the issues they face, and the strategies and tactics most likely to succeed. Covering Product Development, R&D, Pricing, Channels, Sales and Marketing & Product Management. 2009 Financial Handbook Contains hard data for: Software industry metrics and benchmarks; Mergers, IPO’s, and Venture Finance; Compensation; and Operations. For software companies preparing their yearly business plans and budgets.
  • 10. Softletter Research Publications 2009 Software Sales and Telesales Compensation Reports (analyzes compensation and sales efficiency across desktop/retail, OEM, on premise, client/server and SaaS application sectors)
  • 11. Current Surveys of Interest The 2009 Softletter telesales compensation survey is currently open covering: compensation, bonuses, close rates, quota performance and more Company types are desktop/retail, OEM, on premise, client/server, and SaaS All participants receive summary results in the upcoming issues of Softletter Interested? Go to: www.softletter.com
  • 12. 2009 SaaS Industry Reports Highlights
  • 13. Primary Market for Your Product * 2007 figures for B2B were 94%
  • 14. Why Buy SaaS?
  • 15. Most Popular Subscription Options Bi-yearly 4%
  • 16. % Revenues Grew Over the Last 12 Months?
  • 17. Profitable Over the Last 12 Months? No 33% Yes 67%
  • 18. 2009 SaaS Direct Sales Compensation and Efficiency Reports Highlights
  • 19. Some Key SaaS Compensation Metrics What is the average time it takes Percentage to close a major sale (On premise, client/server)? Less than three months 0% Three to six months 32% Six to nine months 21% Nine months to a year 32% A year to 18 months 9% 18 months+ 6%
  • 20. Some Key SaaS Compensation Metrics What is the average time it takes Percentage to close a major sale (SaaS)? Less than three months 23% Three to six months 40% Six to nine months 21% Nine months to a year 11% A year to 18 months 4% 18 months+ 0%
  • 21. Some Key SaaS Compensation Metrics What percentage of your sales Percentage representatives exceeded quota last year? On premise, client/server 30% SaaS 50%
  • 22. Some Key SaaS Compensation Metrics Of the sales representatives that Percentage exceeded quota, by what average percentage did they exceed quota last year? On premise, client/server 15% SaaS 25%
  • 23. 2009 SaaS Operations Metrics Highlights
  • 24. SaaS Operating Metrics Publicly held SaaS companies enjoy a distinct advantage in R&D 4% as % of revenue Enjoy some advantages in sales and marketing: about 2 - 3% as % of revenues
  • 25. 2009 Marketing Report Overview 262 companies participated from U.S., Europe, Eastern Europe, Latin America, Australia and Far East. 211 questions 22 separate marketing categories covered Respondents: 90% CEO’s and Senior Marketing and Sales Executives
  • 26. 2009 SaaS Marketing Report Overview (cont) SaaS companies results broken out and analyzed separately Results were analyzed and cross tabulated “drill down” by company size and phase of development Detailed look at marketing practices, program results, trends, and current and forecasted expenditures. Most comprehensive report of its kind
  • 27. Research Summary Highlights
  • 28. Most Popular Programs
  • 29. Most Effective Programs
  • 30. Top Programs by Investment
  • 31. www.SaaSUniversity.com This presentation is available as a free download at www.saasuniversity.com Sampler of the 2009 SaaS Report also available If you wish to further discuss points raised in this presentation, please post questions and observations on the SaaS U forums You will receive an answer!
  • 32. Softletter’s SaaS University: Marketing, Selling, Infrastructure, and Financing, Chicago, June 30-July 2 30 sessions Five tracks Four keynotes Three SaaS workshops
  • 33. Special Aspire Offers Offer Codes for today’s attendees: $100 Off the Financial Handbook: ITAFIN100 $150 Off SaaS Report: ITASAAS150 Buy Both Report for $449.00 ($395 Off) go to: http://store.softletter.com/ProductDetails.asp?ProductCode=Aegis-0037 $200 Off our upcoming Chicago SaaS Conference: ITA200; go to www.saasuniversity.com Thank You for attending
  • 34. Softletter’s SaaS University: Marketing, Selling, Infrastructure, and Financing, June 3 – July 2
  • 35. Panelist Richard Dym Chief Marketing Officer, OpSource • He has held senior executive positions in fast-paced technology companies ranging from venture backed start-ups to global public enterprises • Prior to working with technology and technology-related services companies, Richard was a Senior Economist with Chase Econometrics, Inc. (a subsidiary of Chase Manhattan Bank, N.A.) • Richard also founded Dym, Frank & Company, a quantitative money management firm.
  • 36. The Business in the Cloud • OpSource provides complete Cloud operations infrastructure and services for SaaS and Cloud businesses • Technical & Application Operations that reduce operational costs • Business Operations that increase revenues • Founded 2002, privately held • Corporate headquarters: Santa Clara, CA. Global offices: U.S. (Santa Clara; Herndon, VA); Dublin; London; Bangalore • Unmatched industry experience • Hundreds of applications • Millions of end-users • Billions of transactions every day Certified © OpSource 2009 Slide 36
  • 37. Purchasers' Perspective : Is SaaS the Survival Strategy in this Down Economy? • The shift to SaaS or On-Demand is inevitable • The down turn will only accelerate the transition by focusing purchaser attention on the short term cost advantages of buying on-demand • Elimination of CapEx • Reduction in OpEx • Fixed to variable cost • Buying only what you need • SaaS projected to grow 22X the overall software market (IDC) • But Cloud noise will add confusion • Bottom line, more opportunity today than a year ago. Strike while the iron is hot © OpSource 2009 Slide 37
  • 38. Carpe Diem: Do it Yourself SaaS Delivery Means Slow Investment Return Break Even Point Substantial Upfront Investment © OpSource 2009 Slide 38
  • 39. IDC Software Megatrends Structural Changes Accelerated by the Financial Crisis • New Delivery Models: • Software as a Service/On-demand • Open Source • e2.0 (social networking, Web 2.0) • New Architectures: • Service-oriented Architecture (SOA) • Event-based • Unified access to content and data • New Ways to Source a Business Process: • Build (mashups, process modeling, business rules, Web 2.0)) • Buy (“good enough” suites vs. best-of-breed) • Integrate (software/services convergence) • Outsource (asset-based delivery) • New Targets: • SMB (intensifying competition for applications) • Channels Source: IDC 2008 • Partnerships (with partner-partner collaboration) © OpSource 2009 Slide 39
  • 40. IDC: Future Trends (Next 2–3 Years) • SaaS is evolving, and sticking to a strict taxonomical definition may be limiting — many ways to approach: • Pure SaaS versus hybrid SaaS? • On-premise + subscription? (Teleo, BlackBaud, others) • Single-tenant? (Oracle, Siebel, many others) • IDC sees a hybrid combination of software and services as a likely evolution of on-premise desktop apps with a services component • Finished apps + callable apps • The future of application consumption will likely be a hybrid of pure SaaS, Software+Services, plus a hybrid patchwork of on-premise apps, custom/verticalized apps, software appliances, hosted AM, etc. © OpSource 2009 Slide 40
  • 41. IDC Worldwide Software on Demand Forecast: Regional Segmentation, 2006- 2012 Revenue ($M) By 2012 EMEA will be 24% of WW revenue 54% EMEA and AP 57% combined equal 60% of WW Hosted AM 63% activity: hosted apps is a common scenario 41% After 2010 AP growth doubles, 2x speed of NA, driven in part by mobile Web •IDC has increased its SaaS growth projection for 2009 from 36% growth to 42% growth over 2008. •The percentage of U.S. firms which plan to spend at least 25% of their IT budgets on SaaS applications will increase from 23% in 2008 to nearly 45% in 2010. © OpSource 2009 Source: IDC, 2008 Slide 41
  • 42. Worldwide Software as a Service Forecast by Customer Segment, 2006–2012 Revenue ($M) SaaS spending grows 4x faster than “all applications” 50% spending After 2009 Large Enterprise spending 52% will grow 14% faster than small and medium 45% Overall 2006-2012 CAGR: 33% 40% Source: IDC, 2008 © OpSource 2009 Slide 42
  • 43. SaaS Firmographics: US Market by App Type SaaS Apps by App type Approx 12% of Approx 5% of US, 2007, based on revenue US CRM Apps US Other Apps Approx 3% of Approx 22% of US 6% US ERM Apps Collaborative Apps Approx 2% of Approx 5% of US Approx 4% of US US O&M Apps SCM Apps Engineering Apps © OpSource 2009 Source: IDC, 2008 Slide 43
  • 44. © OpSource 2009 Slide 44
  • 45. Questions
  • 46. For more details Richard Dym CMO OpSource E-mail: richard@opsource.net Ph. No: +1-408-567-2031
  • 47. For more details Merrill R. (Rick) Chapman Managing Editor Softletter E-mail: rickchapman@softletter.com Ph. No: +1-860-663-0552
  • 48. For more details Janaki Jayachandran Business Manager – SaaS Specialization Aspire Systems E-mail: janaki.jayachandran@aspiresys.com Ph. No: +91-44-67404000